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Governor, Lawmakers Announce Va. Budget Cuts

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MOUNT VERNON, VA - FEBRUARY 17:
Virginia Governor Terry McAuliffe makes remarks during the "Official Observance of Washington's Birthday with the Governor" event at George Washington's Mount Vernon Estate, February 17, 2014 in Mount Vernon, Virginia. Monday is President's Day in the United States, where the nation celebrates the presidential birthdays of George Washington and Abraham Lincoln. (Photo by Drew Angerer/Getty Images)

Virginia Gov. Terry McAuliffe and Republican lawmakers are planning to fill a $882 million budget shortfall by tapping the state government's rainy day fund and making cuts to various agencies, universities, and local governments. The plan won't affect K-12 school spending and will not include any increase in fees or taxes, they said.

The Democratic governor and leaders of the GOP-controlled House of Delegates announced at a Capitol news conference Monday that they have agreed to cuts of $192 million to state agencies, $90 million for higher education, and $60 million for aide to local governments over the next two years.

The budget plan calls for using $705 million from the state's rainy day fund during the next two years. The fund currently holds about $940 million.

McAuliffe called Monday's announcement a "great day'' for Virginia and praised Republican lawmakers for working with him in order to "send a signal to Wall Street'' and preserve Virginia's creditworthiness among bond rating agencies.

"Nothing is more important for us than preserving that triple-A bond rating,'' McAuliffe said.

McAuliffe and Republicans have frequently clashed since he took office in January, most often on whether the state should expand Medicaid eligibility for low-income adults. The General Assembly is set to hold a special session on Medicaid later this week, where lawmakers will also take up the new budget cuts.

Officials said their budget agreement will give localities and state agencies flexibility for where to make cuts. McAuliffe said he hopes to avoid having to eliminate state jobs.

The cuts for state agencies amount to roughly a 4 percent reduction, which Virginia Governmental Employees Association spokeswoman Johnna Cossaboon said "greatly lowers the potential for state employee job losses.''

Jim Campbell, executive director of the Virginia Association of Counties, said he was disappointed that the proposed budget focused solely on cuts and did not include additional revenues. He said certain tax preferences, like the elimination of the state's estate tax, need to be revisited. Campbell said by focusing solely on cuts the state has "chosen to push the monkey onto the backs'' of localities, many of whom have had to raise taxes in recent years in order to balance their budgets.

McAuliffe announced in August that the state's budget deficit was $2.4 billion over the biennium, after the General Assembly had passed a budget in June that predicted a budget gap of about $1.5 billion. McAuliffe has blamed slower federal spending and changes in federal tax policy affecting capital gains taxes for the budget deficits.

The budget agreement announced Monday also calls for McAuliffe to come up with additional cuts and other measures totaling $272 million for fiscal 2016, which the governor will present to the General Assembly during next year's legislative session.